[(Tata Engineering and Locomotive (1970) 1 SCC 622] and KTC Automobile 54 PHT 1 (SC)
Manufacturer to Dealer Delivery Order is addressed by Sale office to Stock Yard in incharge
- Delivery of motor vehicle from stock yards of automobile manufacturer prior to the issue of allocation letter to the dealer is not appropriation to the contract of sale
- It is when the stock yard incharge appropriates the requisite number of vehicles to contract of sale out of available stock by putting down the engine and chasis number in delivery challan, that the goods are appropriated. Till such appropriation it is always open to the company to allot any vehicle to any dealer or to transfer the vehicle from the stock yard in one state to a stock yard in another state
- Dealer is exempted from requirement of registration even though he is in possession o motor vehicle, if he obtains a trade certificate from registering authority of the area. In the trade certificate only class of motor vehicle is mentioned and not the specific particulars of vehicle such as engine number or chasis number. It is permissible for dealer to use motor vehicle covered by trade certificate to use a vehicle for test, repair etc. including proceeding to and from the place of registration.
- If the motor vehicle duly covered by insurance and trade certificate of the dealer gets destroyed during transit from manufacturer to consumer, the liability to pay compensation falls on insurer of buyer who had issued the cover note for insurance [Bombay High Court in Clancy Arcanjia Dias]
Dealer to Customer
- Clearly, mere mentioning of engine number and chassis number of motor vehicle in the invoice of sale does not entitle the intending purchaser to appropriate all the goods i.e. the motor vehicle till its possession is or can be lawfully handed over to him by the dealer without violating the statutory provisions governing the motor vehicles.
- Such transfer of possession can take place only when the vehicle reaches the place where the registering authority will be obliged to inspect for the purpose of finding out whether it is roadworthy and register- able motor vehicle and whether its identification marks tally with those given in the sale invoice and Application for registration. The possession can lawfully be handed over to the purchaser at this juncture because law requires the purchaser as an ‘’owner “ to make application registration but at the same time the law prohibits the use of motor vehicle by the owner until it is duly registered by the Registering Authority. Hence, in order to satisfy the requirements of law noticed above, the dealer can deliver the possession and owner can take the possession and present the vehicle for registration only when it reaches the office of Registering Authority
- With the handing over of the possession of a specific motor vehicle just prior to registration, the dealer completes the agreement of sale rendering it a perfected sale. The purchaser as an ‘’ owner’’ under the Motor Vehicles Act is thereafter obliged to obtain certificate of registration which alone entitles him to enjoy the possession of the vehicle in practical terms by enjoying the right to use the vehicle at public places, after meeting the other statutory obligations of the insurance etc.
- Hence, technically though the registration of motor vehicle is a post- sale event, the event of sale is closely linked in time with the event of registration.
- Neither the manufacture nor the dealer of a motor vehicle can permit the intended purchaser having an agreement of sale to use the motor vehicle even for taking to it to the registration office in the purview of statutory provisions already noticed. Hence the lawful possession with the right of use is permissible to be given to the intended owner only after reaching the vehicle to the office of registering Authority. Thus seen , in practical terms though sale preceeds the event of registration, in normal circumstances and as the law stands, it is co-terminus with the registration of new motor vehicle.
- Article 286(2) of the constitution empowers the parliament to formulate by making law, the principles for determining when a sale or purchase of goods take place in the context of clause (1). As per section 4(2) of the Central Sales Tax Act, in the case of specific or ascertained goods the sale or purchase is deemed to having taking place inside the state where the goods happened to be at the time of making the contract of sale. However, in the case of unascertained or future goods, the sale or purchase shall be deemed to be taken place in the State where the goods happened to be at the time of their appropriation by the seller or buyer, as the case may be.
- There can be no difficulty in holding that motor vehicle remains in the category unascertained or future goods till its appropriation to the contract of sale is occasioned by handing over its possession at or near the office of registration authority in deliverable or registrable state.
Hence from manufacturer to dealer, sale takes place when motor vehicle’s engine and chasis number is mentioned on the delivery challan and in case of dealer to consumer sale takes place at or near the ofiice of registration authority where goods in deliverable and registrable state are handed over by dealer to consumer.
On the basis of above legal position, it was held in KTC Automobile(supra) that sale takes place in the state where registration, temporary or permanent, of vehicle is done and not from where the vehicles are released.